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China's Tesla is betting on hot-wired dreams for US listing

Wed, Aug 15, 2018 - 5:50 AM

A Nio ES8 on display during a media preview of the Auto China 2018 motor show in Beijing. Nio wants to be a tech company. The idea is to hook drivers with a network of online services and offline infrastructure, including exclusive clubhouses.

PHOTO: REUTERS

Hong Kong

BASED in Shanghai and focused on the mainland market, electric car maker Nio aims to raise up to US$1.8 billion in a New York listing. Chinese drivers are getting greener and richer, but with fewer than 500 of its cars delivered, that's a racy aspiration.

The market has warmed to electric vehicles, especially at the high end, Nio's niche. US-listed Tesla, which has yet to report an annual profit, boasts a market capitalisation of US$60 billion. In China, investors are just as enthusiastic.

Shenzhen-listed shares in Warren Buffett-backed BYD, which caters to less-wealthy customers, are trading at 24 times estimated earnings for the next 12 months, more than twice traditional automakers like SAIC Motor.

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There is reason to be enthusiastic, even if cleaner vehicles are still less profitable than gas guzzlers. Beijing wants electric vehicles to account for a fifth of the country's total fleet by 2025 as it cleans up notoriously smoggy air.

In the world's largest auto market, there are subsidies and substantial infrastructure investment too, including more than 200,000 public charging piles.

Nio looks optimistic anyway. The Chinese company plans to raise as much as US$1.8 billion, according to its preliminary prospectus. Comparing it with Tesla makes Elon Musk look modest: his company's net loss was US$56 million a year before it went to market and it had delivered more than 1,000 cars by the time it listed, raising US$226 million.

Nio reported a net loss of US$759 million for 2017, on under US$7 million of revenue.

The business model is also untested. Nio wants to be a tech company. The idea is to hook drivers in with a network of online services and offline infrastructure, including exclusive clubhouses.

It wants to inspire the kind of loyalty Apple commands. That's a daring bet - and an expensive one, for a company already burning through cash fast. At luxury prices, Nio is asking investors to buy into bold electric dreams. REUTERS